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First Solar, Inc. (FSLR) Looking Mighty Nice In Them Shorts

 August 06, 2012 10:56 AM
 

(By Rich Bieglmeier) There are a lot of interesting stocks to pick from this week's money flow report. Ordinarily, most of the names that move to the top are relatively unheard of biotechs. Not on the list from July 30 to August 3, 2012.  Many of the companies that dot the leaderboard are fallen angels and recognizable by name. We will probably cover more than one in the days ahead.

Like all days, iStock will start with the rising sun. First Solar, Inc. (FSLR) heated up as Wall Street accumulated $33.6 million or 2.27% of the solar module maker. FSLR stepped out of the shadows of disaster after falling from a high of $107.99 all the way to $11.43 during the last 12 months.

All the Street's excitement came as the company reported $1.27 a share for its 2nd quarter, up 57 cents from a year ago and 37 cents higher than anticipated. For the quarter, First Solar posted revenue of $957 million, higher than Wall Street's expectations of $819.9 million.

Management lifted its 2012 top line estimate to $3.6 billion -$3.9 billion, up from $3.5 billion - $3.8 billion. Meanwhile, analysts were predicting $3.48 billion. For the bottom line, earnings per share for the full year have been raised to $4.20 - $4.70, higher than previous guidance of $4 - $4.50 per share. The consensus now stands at $4.34, leaving room for more upside surprises.

The quarterly profit checkup jacked FSLR's price from $14.80 to $17.93 from close to close Wednesday and Thursday. The outburst occurred on the highest day of volume the sun stock has ever seen. On Thursday, 28,193,500 shares changed hands. That's 32% of share outstanding and nearly half of its 60 million share float (stock available for trading).

Now, the fight is on between good and evil as nearly 56% of First Solar's float is sold short, according to the latest data; although, surely, some of Thursday's and Friday's volume was short covering. We just don't know how much yet. The bottom line is that short-sellers are going to try and keep the stock down. iStock suspects they may have a hard time as much of the stock is in new hands now, which aren't in a hurry to "please just get me out."

If the stock price can break Thursday's post-earnings trading high of $19.12, look the heck out. The shorts could get tight; John Stockton tight and the squeeze could be on. After $20, FSLR could ratchet up $10 at a time, $30, then $40, then $50, and then it goes parabolic back to triple digits.

Of course, a lot of good things have to happen between here and a hundy. However, on so many levels First Solar is still dirt cheap. The company trades for just 48 cents for every dollar per share in sales. FSLR has a measly forward P/E of 4.22, and a PEG Ratio of 0.16. Like golf, the lower the better, and iStock doesn't recall seeing another company this close to zero.

But, the valuation that really catches our attention is First Solar's $38.65 book value, which is more than double its current price.

If First Solar, Inc. (FSLR) continues to flare, iStock sees no reason why the valuation stars can't line up at one times sales and book value, both of which would put the stock in the neighborhood of $40.

If the heat becomes too much for shorts, the current price may prove to be investors' winter solstice.


Rich
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